diff --git a/.changeset/loud-walls-collect.md b/.changeset/loud-walls-collect.md
new file mode 100644
index 0000000000..78356eef38
--- /dev/null
+++ b/.changeset/loud-walls-collect.md
@@ -0,0 +1,5 @@
+---
+'@backstage/cli': patch
+---
+
+Fixed module resolution of external libraries during backend development. Modules used to be resolved relative to the backend entrypoint, but are now resolved relative to each individual module.
diff --git a/.changeset/neat-brooms-allow.md b/.changeset/neat-brooms-allow.md
new file mode 100644
index 0000000000..a4c69b0945
--- /dev/null
+++ b/.changeset/neat-brooms-allow.md
@@ -0,0 +1,5 @@
+---
+'@backstage/config-loader': patch
+---
+
+Each piece of the configuration schema is now validated upfront, in order to produce more informative errors.
diff --git a/.changeset/nice-bottles-battle.md b/.changeset/nice-bottles-battle.md
new file mode 100644
index 0000000000..a688241caa
--- /dev/null
+++ b/.changeset/nice-bottles-battle.md
@@ -0,0 +1,5 @@
+---
+'@backstage/plugin-app-backend': patch
+---
+
+Failures to load the frontend configuration schema now throws an error that includes more context and instructions for how to fix the issue.
diff --git a/packages/cli/src/lib/bundler/config.ts b/packages/cli/src/lib/bundler/config.ts
index c53a8329f5..6fbcc65c9a 100644
--- a/packages/cli/src/lib/bundler/config.ts
+++ b/packages/cli/src/lib/bundler/config.ts
@@ -219,7 +219,7 @@ export async function createBackendConfig(
         }
       : {}),
     externals: [
-      nodeExternals({
+      nodeExternalsWithResolve({
         modulesDir: paths.rootNodeModules,
         additionalModuleDirs: moduleDirs,
         allowlist: ['webpack/hot/poll?100', ...localPackageNames],
@@ -296,3 +296,32 @@ export async function createBackendConfig(
     ],
   };
 }
+
+// This makes the module resolution happen from the context of each non-external module, rather
+// than the main entrypoint. This fixes a bug where dependencies would be resolved from the backend
+// package rather than each individual backend package and plugin.
+//
+// TODO(Rugvip): Feature suggestion/contribute this to webpack-externals
+function nodeExternalsWithResolve(
+  options: Parameters<typeof nodeExternals>[0],
+) {
+  let currentContext: string;
+  const externals = nodeExternals({
+    ...options,
+    importType(request) {
+      const resolved = require.resolve(request, {
+        paths: [currentContext],
+      });
+      return `commonjs ${resolved}`;
+    },
+  });
+
+  return (
+    context: string,
+    request: string,
+    callback: webpack.ExternalsFunctionCallback,
+  ) => {
+    currentContext = context;
+    return externals(context, request, callback);
+  };
+}
diff --git a/packages/config-loader/src/lib/schema/compile.ts b/packages/config-loader/src/lib/schema/compile.ts
index 2607d51f80..e340d775a1 100644
--- a/packages/config-loader/src/lib/schema/compile.ts
+++ b/packages/config-loader/src/lib/schema/compile.ts
@@ -69,6 +69,14 @@ export function compileConfigSchemas(
     },
   });
 
+  for (const schema of schemas) {
+    try {
+      ajv.compile(schema.value);
+    } catch (error) {
+      throw new Error(`Schema at ${schema.path} is invalid, ${error}`);
+    }
+  }
+
   const merged = mergeAllOf(
     { allOf: schemas.map(_ => _.value) },
     {
diff --git a/plugins/app-backend/src/lib/config.ts b/plugins/app-backend/src/lib/config.ts
index 99590c1e2d..0607956894 100644
--- a/plugins/app-backend/src/lib/config.ts
+++ b/plugins/app-backend/src/lib/config.ts
@@ -84,13 +84,21 @@ export async function readConfigs(options: ReadOptions): Promise<AppConfig[]> {
   const schemaPath = resolvePath(appDistDir, '.config-schema.json');
   if (await fs.pathExists(schemaPath)) {
     const serializedSchema = await fs.readJson(schemaPath);
-    const schema = await loadConfigSchema({ serialized: serializedSchema });
 
-    const frontendConfigs = await schema.process(
-      [{ data: config.get() as JsonObject, context: 'app' }],
-      { visibility: ['frontend'] },
-    );
-    appConfigs.push(...frontendConfigs);
+    try {
+      const schema = await loadConfigSchema({ serialized: serializedSchema });
+
+      const frontendConfigs = await schema.process(
+        [{ data: config.get() as JsonObject, context: 'app' }],
+        { visibility: ['frontend'] },
+      );
+      appConfigs.push(...frontendConfigs);
+    } catch (error) {
+      throw new Error(
+        'Invalid schema embedded in the app bundle, to fix this issue you need ' +
+          `to correct the schema and then rebuild the app bundle. ${error}`,
+      );
+    }
   }
 
   return appConfigs;